32 Balanced Budget consisting of the General Allocation Funds DAU,
Special Allocation Funds DAK, and Tax Share DBH consisting of taxes and income from natural resources. Besides the Balanced Budget
DAU, DAK.etc, Local Governments have their own sources of funding in the form of Original Local Government Revenues PAD and Local
Government Financing. According to the Law No.33, 2004 about Central Balanced
Budget and local government stated that DAU in a Region Provincial, District and City is determined by using a fiscal gap approach, which is
indicated by local needs and the potential of a region Natural and Human Resources. The General Allocation Funds DAU are used to
cover the fiscal gap. Fiscal gap happened when the Local Government Expenditures exceed the Original Local Government Revenues PAD.
B. Previous Research
Researchers had previously analyzed the effects of PAD, DAU and local government expenditures in Java, Bali and Sumatra. The analysis of the
Sumatra case study shows that the PAD did not significantly affect the local government expenditures. That means Flypaper Effect occurred. This
along with the hypothesis demonstrates that the influence of DAU on local government expenditures is greater than the influence of PAD on
local government expenditures is accepted.
33 Previous researchers such as Abdullah Halim 2004 stated DAU
and PAD had a significant effect on local government expenditure budget. Maemunah 2006 analyzed the effect of General Allocation Funds DAU
and Original Local Government Revenues PAD on local government expenditures on Sumatra with the objective to show:
1. The influence of General Allocation Funds DAU and regional original
revenues PAD to government expenditures districts cities in Sumatra.
2. The possible Flypaper Effect on districts cities expenditures on the
island of Sumatra.
3. The tendency of Flypaper Effect which led to an increasing number of
local government expenditures.
Another study conducted by Nur Indah Rahmawati 2010 who investigated the districts cities in Central Java province and concluded that
the PAD positively affects the allocation of expenditure budget. Local Governments with high revenues show higher local government expenditure
allocations. If the General Allocation Fund DAU is higher, automatically Local Government Expenditure BD higher too . It cannot be concluded
whether Flypaper Effect has occurred or not. The research conducted by Puspita Sari 2009 tested the effect of the
DAU and PAD against direct expenditures in districts cities in the Riau Province. There are three conclusions:
34 1.
The DAU has a positive and significant effect on direct expenditures.
2. The PAD has partially positive and significant effects on direct
expenditures.
3. The DAU and the PAD have simultaneously significant effects on direct
expenditures.
Table 2.2 Previous Research Table
No. Author Year Thesis Title
Variables Conclusions
1 Syukriy
Abdullah Abdul
Halim 2004
Effect of General Allocation
Funds DAU and Original
Local Government
Revenues PAD On Local
government expenditure Budget.
Case Study Districts Cities on Java and
Bali island 1.
General Allocation Funds
DAU 2.
Original Local
Government Revenues PAD
3. Local
government expenditure
Budget Original
Local Government
Revenues PAD and
General Allocation Funds
DAU have
significant influence on the
local government expenditure
budgets.
2 Mutiara
Maimunah 2006
Flypaper Effect on General Allocation
Funds DAU and Original
Local Government
Revenues PAD to local
government expenditure budget
case study Sumatra island
1. General
Allocation Funds DAU
2. Original Local
Government Revenues
PAD
3. Local
government expenditure
Budget Flypaper
Effect can
used for
predicting Local Government
Expenditures in
the future.There
are no differences in the occurrence
of Flypaper Effect on PAD.
3 Nur
Indah Rahmawati
2010 The
Effect of
General Allocation Funds DAU and
